Funding New Power Plants

Should consumers or investors pay?

Karen Tucker, 54, of Reidsville, is among the AARP volunteers who will receive training on how to fight an expected legislative proposal by utility companies that could lead to higher electricity rates.

Illness forced Karen Tucker, 54, of Reidsville into early retirement from her job as a registered nurse, but she hasn't stopped helping people. This month, she'll attend an AARP training session to learn how to fight an expected proposal that could lead to higher rates for electricity.

AARP North Carolina is concerned that the General Assembly will follow the lead of states that allow utilities to more easily pass on power plant construction costs to customers.

That would hit people on fixed incomes hardest, especially the more than 1.2 million North Carolinians who are 65 or older.

Fixed incomes but not fixed bills

Paying for essentials is already difficult for Tucker and many older adults she talks to at church and through her volunteer work.

"They'd say, 'We don't have enough money to pay our utility bills.' Or 'I'm going to have to leave my house and go live with my daughter or find someplace to go,' " said Tucker, whose electric bill has been as high as $300 a month.

Duke Energy, which increased its rates 7.2 percent in February, wants a change in North Carolina's "Construction Work in Progress" law, which requires full rate hearings before construction financing costs are passed on to consumers.

Duke wants a streamlined rate-hike process that looks only at construction financing costs, not all aspects of its rate structure. Rate hearings are lengthy, and the cost of the extensive hearings is ultimately borne by customers, according to Betsy Conway, a Duke Energy spokeswoman.

Because of its recent merger with Progress Energy, Duke Energy has not yet set its agenda for the legislature's 2013-14 session. But Conway made it clear the company will seek the change eventually.

"The ability to recover financing costs during plant construction helps keep the cost of borrowing money lower, which, in turn, lowers the overall cost of the plant," she said.

Developing new electricity-generation plants and upgrading older ones is as necessary as planning for new schools when the population is increasing, she said.

AARP North Carolina wants volunteers to be informed if the issue comes up next year, as expected. During a three- to four-hour training session this month, Tucker and other "utility watchdogs" will learn about the proposed change and how to challenge it. They'll also learn more about conserving energy so they can share those tips with others.

Greg Tanner, AARP North Carolina associate director, hopes volunteers will sign on for at least six months to two years. But, he said, a volunteer's time commitment will depend on how involved he or she wants to be.

Utility watchdogs will learn how to explain the rate-increase process, Tanner said. Some will learn how to organize small groups to discuss the issue.

With no specific proposal before the General Assembly, the actual effect on North Carolina residential customers is unknown. But in nearby Georgia, which allows construction costs to be passed on through streamlined hearings, a residential customer using 1,000 kilowatt hours of electricity a month pays an average of about $4.10 extra each month to cover nuclear plant construction, according to the Georgia Public Service Commission.

An interest-free loan?

Bill Gupton, of Raleigh, outreach director for Consumers Against Rate Hikes, said the risk and cost of construction should be borne by shareholders, not ratepayers.

"Local governments, small businesses and residential customers — especially those on fixed incomes — can't afford to give the utilities an interest-free loan," he said.

Tanner said that "whether you're on a fixed income or very wealthy, this is going to impact you, and more so for people with low incomes and seniors on fixed incomes."

To become a utility watchdog, contact Greg Tanner at 919-508-0273 or email gtanner@aarp.org.

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